Not a bad afternoon’s work. The Amazon CEO saw his 82.9 million shares increase in value by $6 billion as the company’s shares jumped over 10% in after-hours trading on earnings results that beat expectations.

He’s now “worth” $55 billion, not $49 billion. (Share price went to something like $662 per share.)

Of course, these always amuse me – yep, he’s “worth” $55 billion – unless he actually tries to cash it in. You and I could cash in (well, if we actually had Amazon stock), and not affect the price so that anyone would notice – if he tried to sell even 1% of his shares, the price would crash so fast… (The only way for a person with big “net worth” from their company stock to actually make use of it is by using it as collateral for loans – which of course leads to big failure when the “net worth” goes down for some other reason than their selling it off.)

Oh, and I don’t know from the press release just how much KDP authors had to do with the improvement in Amazon results – so I also don’t know how much they “should have” seen in increased payouts.

The entire KDP revenue is such a small fraction of Amazon’s gross revenue, it’s insignificant. In fact, one suspects the entire Amazon bookselling business is only a small fraction of their gross revenue. They began as a bookstore but they now sell everything. That does not mean KDP authors are paid enough. They are paid much too little. Amazon needs to reward KDP authors for providing the low cost content that attracts many people to buy Amazon e-readers and tablets and drawing people to the website to buy other things. Payouts to authors based on KU subscriptions is not a fair payout considering the retail value of KU subscribers who buy loads of merchandise outside their $10 a month subscription fee and outside direct KDP sales. The real problem for KDP authors is that Amazon has no real competition as an indie publishing platform.

If the toaster guy is not making enough selling toasters on Amazon because there’s no place else to sell, then yes AZ needs to keep the toaster guy alive. Amazon is a sellers’ community and it’s in the enterest of everyone, including Amazon, to keep the community afloat.

Amazon has no responsibility for keeping either author or toaster guy alive. If either isn’t making enough money, they can go do something else. Nobody owes either of them a place to sell. Nobody has any obligation or responsibility to use their time, money, and resources to create something so toaster makers or authors have a place to sell.

Amazon is a corporation that has multiple lines of business. It isn’t a community.

Gee, it’s not a question of obligation or responsibility (or survival of the fittest in a “free” market), it’s merely a question of common business sense. If high value authors leave KU because they’re not making enough money, KU becomes a trash basket and KU folds and Amazon loses the KU subscribers and their other purchases. Of course, Amazon has no “obligation” or “responsibility” to keep from losing subscribers or to keep from doing or not doing anything else. Barnes and Noble also had no obligation or responsibility to not alienate readers and authors, and their lack of responsibility and obligation killed them.

“If the toaster guy is not making enough selling toasters on Amazon because there’s no place else to sell, then yes AZ needs to keep the toaster guy alive.”

Not if he makes crap toasters — or there are hundreds of other guys/gals making and selling better/cheaper toasters, there’s no need for Amazon (or anyone else) to keep him alive — he’s toast!

By that logic, trad-pub should be buying up every toaster(book) offered to them and paying every writer a living wage. They don’t, and we never expected them to; but for some strange reason we expect Amazon to do that and more?

As some say; use it while the using’s good, bail when it goes to pot; but please stop acting like it’s a ‘big deal’. To you, it might ‘seem’ to be a big deal, but to Amazon (and the rest of the world) it’s not even a sugar ant.

We’re not talking about crap toasters. What about the suppliers who make quality toasters? Lose quality suppliers? Do you think every supplier in KU is making crap content? There is no evidence for that at all.

That’s not what I said. You said Amazon needs to keep a toaster guy alive. I said there are lots of toaster guys/gals out there, why would any ‘one’ need to be kept alive?

Just like books, toasters come in all sizes in many designs at all levels of quality and all levels of prices. Who decides which toaster makers will live of die? The market, the buyers.

Amazon has set aside an area where — if they dare — toaster makers can place their toasters out for buyers to try. Amazon pays the toaster company by how many slices are run through their demo toasters. They have a ‘pot’ and each toaster gets a slice of that pot by how much they were used.

There may be some crap toasters in the lineup that have their friends ‘test’ it to collect a bit of extra slices, but it’s as fair as Amazon can make it — for now.

With luck they’ll shift their bots again and weed out the ones gaming the system, though they might sweep up some of the good toasters when cleaning out the bad.

The system is fair but the pot is too small and needs to be about double what it is now to keep quality in KU. People who sell toasters on Amazon do not have a pot to split. Only KU content suppliers have a pot to split and the pot needs to be bigger or KU will die. Amazon does not say how the size of the pot is determined, so at present it’s a rigged market for KU content with Amazon in control. At present an author who has 100,000 equivalent printed pages read in KU each month gets about $1000 a month, not enough to make it worthwhile to keep churning out new good content. In general, the toaster analogy may be appropriate for direct sales of books but not for KU. If you’re a KU author you need to understand that.

As far as ‘not enough to make it worthwhile to keep churning out new good content’, some of the writers seem to disagree. Could it be bigger? Sure, but would it actually mean more in a writers pocket or just more scammers/system gamers looking for a free/easy meal?

Writers that don’t think it’s enough won’t use it, or can’t because they wish to go wide. For the rest, it’s ‘pot luck’ with no one forcing them to play.

Though some seem to think it helps with visibility. What’s that worth? For some a smaller pot is worth it to be more noticed. Reminds me of the old saying about having your cake and wanting to eat it too …

The system is fair but the pot is too small and needs to be about double what it is now to keep quality in KU.

If KU has a sufficient number of quality authors to satisfy Amazon, they don’t need to do anything. Maybe they don’t have all quality authors. OK. So what? Lots of quality authors are not in KU, but are in the normal sales program.

Some authors may even judge the value of KU by their total earnings rather than the unit price/page.

There is a huge supply of books now. It increases everyday as backlist items are digitized, and authors write new stuff. KU is a version of price cutting. And price cutting is the normal result of a huge supply.

Most of the complaints by authors that they don’t get enough money are because there are so many of them. Consumers don’t want all their stuff at prices necessary to keep the authors happy. Consumers don’t give a rip if authors make what authors think they should. KU is a response to that high supply.

Because the AAP just announced that total tradpub gross revenue for trade publishing was $7.2B for 2015.
Assuming an (overly generous) 12% net royalty rate would mean tradpub delivered to its authors from print, digital, and audio something like $840 million, from all outlets. (Going with a probably more realistic 9% cuts that down to
$648M)

Given the ratio of tradpub to Indie titles in the market, Amazon seems to be doing reasonably well by its Indie suppliers. 😉

(Factoring in print and non-Amazon channels, Indie, Inc seems to be getting close to matching tradpub in US author revenue.)

That 285M is for KDP including KU, which these days makes up roughly half of the Amazon indie author-earnings total.

However it doesn’t include print or audio, or indie earnings from other ebook vendors.

And it also doesn’t include Amazon publishing imprints, which pay an additional $55 million annually to A-pub authors for their US Kindle sales (and another $15 million for UK & international Kindle sales).

When contrasting indie author-earnings numbers with trad-pub reported numbers, a few things to keep in mind:

1) The 6%/8%/15% trad-pub print royalties are — I believe — usually defined as a percentage of LIST price (at least the 15% hardcover royalties are. Not sure about the 6%/8% paperback/MMPB royalties, although we’ve conservatively modeled them % of LIST for the print-book AE calcs.).

OTOH, the AAP et. al. report as gross revenue the NET receipts from retailers, after the retailer’s share has already been deducted.

So as a percentage of publisher gross receipts, a 15% tradpub royalty on a hardcover is probably more like 20-30% of publisher gross (which can be half of list price). Of course, by the same token, Amazon is paying indies 100% of NET receipts defined the same way, so a lot of it comes down to terminology. 🙂

I’d put the trad-pub authors’ collective royalties from traditional publishing’s reported $7.2 billion in domestic gross revenue at roughly $1.2 billion ($250M ebook, $825M print, $75M audio+other). But it’s important also to consider how those author earnings are allocated among authors. James Patterson’s personally taking home nearly 10% of all trad-pub author earnings, and the next 20 authors down — all household names with decades-long bestseller careers — collectively account another 20% of the total (Check a recent Forbes list of highest-earning trad-pub authors if you want to know who). OTOH, trad-pub debuts in the last few years, especially midlisters, are getting a negligible and fast-diminishing share of those earnings.

An apples-to-apples trad-versus-indie comparison would be against $440M total in US indie author earnings ($285M from Amazon KDP incl. KU + $50M from other ebook stores, $90M in indie print, $15M from indie audio).

Among indies, while there are some notable 7-figure and even just-barely-8-figure annual earners, they account for a far smaller share of that $440M in author earnings than their trad-pub counterparts, while indie midlisters and debuts command a far higher share than their trad-pub equivalents.

For now, at least, the distribution of income is (relatively) flatter and less winner-take-all skewed on the indie side than the trad-pub side.

But the only constant is change. 🙂

PS – Just ran our biggest all-formats AE spidering yet: 1,500,000 Amazon titles (575,000 Kindle ebooks, 900,000 print, 67,500 audio). In addition to pulling all the books off every single Amazon bestseller list, the spider now pulls EVERY OTHER BOOK that each of those authors has for sale on Amazon. So we will get a complete picture of 100% of each of their Amazon earnings that day, not just the portion of their earnings from bestseller-listed titles.

Hugh and I might get a chance to kick that data around next week,so expect an AE report in May sometime.

Amazon Affiliate

The Passive Voice is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for website owners to earn advertising fees by advertising and linking to amazon.com, audible.com, and any other website that may be affiliated with Amazon Service LLC Associates Program. As an Amazon Associate I earn from qualifying purchases.